Remember Black Monday in August last year, when the Chinese stock market crashed by 8.5% and the FTSE 100 plunged 4.5%? As hysteria gripped global markets, Gordon Brown’s ex-adviser Damian McBride showed his mettle by urging everybody to panic-buy tinned food and bottled water. And then the roof of the world caved in so that today we live in a post-apocalyptic doomsday world with no hope.
Don’t Panic!
Except that last bit didn’t happen. Last time I looked, the roof of the world was still there, and if you want to know what a post-apocalyptic doomsday world with no hope looks like, you need to buy an Xbox. While McBride was rushing around telling everybody to lose their heads, I penned an article urging people to keep calm and carry on investing (and keep drinking the tap water).
I said that if you looked beyond the panic, there were good reasons to stay calm, adding: “If you take the longer-term view, as we do at the Fool, you will see that this is merely a stock market shiver. And like every single stock market shiver that has come before, it will pass.” And so it came to pass. Markets stabilised, panic subsided, and all that tinned food is sitting on the shelf, unopened.
Grin And Bear It
It is worth reminding ourselves of all this, as markets crash once again. The FTSE 100 is down 3% today. Over the last year, it is down 20%. There is no denying it: we are in a bear market. Your portfolio has more claw marks than Leonardo DiCaprio in The Revenant, and so does mine. For what it’s worth, I reckon there is more pain to come. I say for what it’s worth, because nobody knows for sure. I started the year in a pessimistic mood, but even I didn’t expect 2016 to begin with an outright bloodbath.
One week today I wrote: the market will crash further so get ready to buy shares. With the FTSE plunging below 5700 today, that moment is getting closer. At some point, when we least expect it, sentiment will spin on a sixpence, and people will start buying shares again. Those who get in early will pick up the best bargains.
If you could accurately predict these things, you would be super-wealthy, but you can’t. Nobody can. What you can do is take advantage of market dips like this one to buy — no, not Campbell’s Soup and Highland Spring — but stocks and shares of quality companies at reduced prices.
Top Stocks Going Cheap
Don’t expend all your ammunition in one go. Buy a little today, and if markets fall further, buy a little bit more. Top FTSE 100 stocks such as Barclays, British American Tobacco, Lloyds Banking Group, Reckitt Benckiser, Unilever and Vodafone aren’t about to collapse, and nor is the roof of the world.
Braver investors than I might even dive into the oil sector, having decided that troubled oil giants such as BP and Royal Dutch Shell are ripe for a revival. Crazy heads might even be tempted by mining giants BHP Billiton and Rio Tinto, although I wouldn’t touch them myself. Or you could spread your bets by taking out a FTSE All Share tracker.
Whatever you do, keep calm. The current mayhem won’t last forever. And when things settle, you will be glad you took advantage of today’s low valuations to carry on buying shares.
